Greenway Medical Technologies acquired by Vista Equity Partners: fairness opinion by J.P. Morgan
Deal terms
Implied value per share by method vs. $20.35 offer
Ranges as disclosed in the banker’s summary of analyses; the red line marks the per-share consideration.
Opinion of J.P. Morgan to the target board
Discounted cash flow assumptions
Terminal growth rate applied to 2023 unlevered free cash flow.
Selected public companies (21)
Cerner Corporation · HMS Holdings Corp. · The Advisory Board Company · Computer Programs & Systems, Inc. · Vocera Communications, Inc. · athenahealth, Inc. · Medidata Solutions, Inc. · Allscripts Healthcare Solutions, Inc. · WebMD Health Corp. · MedAssets, Inc. · Quality Systems, Inc. · Merge Healthcare Incorporated · Salesforce.com, Inc. · Fleetmatics Group PLC · Demandware, Inc. · Jive Software, Inc. · Concur Technologies, Inc. · RealPage, Inc. · E2open, Inc. · Guidewire Software, Inc. · Model N, Inc.
| Multiple | Peer low | Peer median | Peer high | Range applied | Implied per share |
|---|---|---|---|---|---|
| Firm Value / 2014E Revenue (Healthcare IT) | — | 3.3x | — | 3.0x–4.0x | $18.75–$24.50 |
| Firm Value / 2014E Revenue (Software) | — | 6.3x | — | 3.0x–4.0x | $18.75–$24.50 |
| Firm Value / 2014E EBITDA (Healthcare IT) | — | 12.0x | — | 15.0x–20.0x | $16.50–$21.50 |
| Firm Value / 2014E EBITDA (Software) | — | 33.1x | — | 15.0x–20.0x | $16.50–$21.50 |
Selected precedent transactions (33)
| Date | Target | Acquirer | Multiple |
|---|---|---|---|
| — | Epocrates, Inc. | AthenaHealth, Inc. | — |
| — | Decision Resources Group | Piramal Healthcare Limited | — |
| — | Thomson Reuters—Healthcare | Veritas Capital | — |
| — | Transcend Information, Inc. | Nuance Communications, Inc. | — |
| — | Sage Healthcare Division | Vista Equity Partners | — |
| — | Emdeon Company | The Blackstone Group L.P. | — |
| — | Medical Present Value, Inc. | Experian plc | — |
| — | Medicity, Inc. | Aetna Inc. | — |
| — | Healthgrades Inc. | Vestar Capital Partners | — |
| — | Eclipsys Corp | Allscripts Healthcare Solutions, Inc. | — |
| — | Phase Forward, Inc. | Oracle Corporation | — |
| — | IMS Health Group Limited | TPG Capital | — |
| — | TriZetto Corp. | Apax Partners LLP | — |
| — | Press Ganey Associates, Inc. | Vestar Capital Partners | — |
| — | Visicu, Inc. | Koninklijke Philips N.V. | — |
| — | Per-Se Technologies, Inc. | McKesson Corporation | — |
| — | IDX Systems, Inc. | General Electric Company | — |
| — | NDCHealth Corp. | Per-Se Technologies, Inc. / Wolters Kluwer N.V. | — |
| — | Websense, Inc. | Vista Equity Partners | — |
| — | Stonesoft Corporation | McAfee, Inc. | — |
| — | EBIX, Inc. | Goldman Sachs PIA | — |
| — | Retalix Ltd. | NCR Corporation | — |
| — | LMS International | Siemens AG | — |
| — | JDA Software Group, Inc. | RedPrairie Corp. | — |
| — | Opnet Technologies, Inc. | Riverbed Technology Inc | — |
| — | Kenexa Corporation | International Business Machines Corporation | — |
| — | Deltek, Inc. | Thoma Bravo, LLC | — |
| — | Quest Software, Inc. | Dell, Inc. | — |
| — | Ariba, Inc. | SAP AG | — |
| — | Convio, Inc. | Blackbaud, Inc. | — |
| — | Blackboard, Inc. | Providence Equity Partners | — |
| — | NSB Retail Systems plc | Epicor Software Corporation | — |
| — | SS&C Technologies Holdings, Inc. | The Carlyle Group | — |
| Multiple | Low | Median | High | Range applied | Implied per share |
|---|---|---|---|---|---|
| Enterprise Value / Forward Revenue (Healthcare IT) | — | 2.6x | — | 3.5x–4.5x | $17.25–$22.00 |
| Enterprise Value / Forward Revenue (Software) | — | 3.0x | — | 3.5x–4.5x | $17.25–$22.00 |
| Enterprise Value / Forward EBITDA (Healthcare IT) | — | 10.9x | — | 20.0x–25.0x | $12.50–$15.50 |
| Enterprise Value / Forward EBITDA (Software) | — | 19.7x | — | 20.0x–25.0x | $12.50–$15.50 |
Approximately $7.7 million total fee, $1 million payable upon delivery of the opinion, remainder contingent on consummation. In the prior two years J.P. Morgan received approximately $1.0 million of fees from the Company and approximately $6.4 million from Vista Equity Partners and its affiliates.
Management projections
| Projection year | Year 1 | Year 2 | CAGR |
|---|---|---|---|
| Revenue | $225M | $317M | 40.9% |
| Revenue growth | 48.0% | 40.9% | |
| EBITDA | $46.0M | $78.0M | 69.6% |
| EBITDA growth | 142.1% | 69.6% | |
| EBITDA margin | 20% | 25% | |
| Implied EV / EBITDA | 14.0x | 8.3x |
Year-1 growth is against LTM at announcement ($152M revenue, $19.0M EBITDA); later years are year over year.
Management prepared Company Case 1 Projections (used by J.P. Morgan for its opinion) showing revenue of $152M in 2014E rising to $317M in 2016E, Adjusted EBITDA of $19M to $78M, and free cash flow of $1M to $52M. Calendarized calculations and extrapolations from Case 1 covered 2013E-2023E, with revenue of $139M in 2013E growing to $546M in 2023E and EBITDA of $12M growing to $137M. More conservative Company Case 2 ($143M/$17M EBITDA in 2014E to $243M/$52M in 2016E) and Company Case 3 ($149M/$19M to $259M/$59M) projections were given to the Board and J.P. Morgan for reference purposes only and were not used as a basis for the opinion.
Process notes
Other Digital / HealthTech fairness opinions
- Accelrys / Dassault Systèmes SA 2014 · 16.3x EV/EBITDA
- Merge Healthcare / IBM Watson Health 2015 · 19.5x EV/EBITDA
- Press Ganey Holdings / EQT 2016 · 16.1x EV/EBITDA
- Everyday Health / Ziff Davis 2016 · 10.3x EV/EBITDA
- Imprivata / Thoma Bravo 2016
- HealthGrades / Vestar Capital Partners 2010 · 17.0x EV/EBITDA